Effectiveness of fiscal policy on global crisis: An application in Turkey

The issue of government intervention in the economy has been one of the most primary discussion points of economics in every period. Following the 1929 Great Depression, a new dimension has been brought to the role of government in economy, in line with standpoint of J.M. Keynes and an active role has been given to fiscal policy in achieving economic growth. Later on, the developments emerging as a result of the oil price shocks in 1970s and the fiscal contraction policies implemented in Europe in 1980s have led to new discussions on the activity of fiscal policy. As a result of the developments, economists have criticized Keynes severely for the activity of task having been imposed to fiscal policy by him, in achieving economic growth. Fiscal policy, whose importance has stayed background among other economic policies until the year 2008, has become a matter, whose importance among economic policies was started to be questioned again, as a result of the global crisis emerging in the USA and in order to overcome the crisis, an active role has been given to fiscal policy again. Turkey has redressed its fiscal balance by implementing a contractionary fiscal policy after the financial crisis in 2001, and as in the other parts of the world, has activated implementations of expansionary fiscal policies in order to remove the influences of the global crisis. The primary aim of this study is to find out whether fiscal policy implemented after the global crisis is efficient or not. The study analyzes the efficiency of fiscal policy practices implemented during the process of global crisis in Turkey. Time-series analysis method has been used and 2002:4-2014:4 period has been taken as a basis in the study. In the end, the study presents that, fiscal policy implemented in Turkey after the global crisis is efficient in economic growth, and public expenditures used during crisis period, that are among means of fiscal policy, are more efficient means of policy, compared to taxes. Keywords: Fiscal Policy, Global Crisis, Johansen Cointegration Analysis, VAR Analysis.